Sawmills and Wood Preservation
Industry Profile Report
Dive Deep into the industry with a 25+ page industry report (pdf format) including the following chapters
Industry Overview Current Conditions, Industry Structure, How Firms Operate, Industry Trends, Credit Underwriting & Risks, and Industry Forecast.
Call Preparation Call Prep Questions, Industry Terms, and Weblinks.
Financial Insights Working Capital, Capital Financing, Business Valuation, and Financial Benchmarks.
Industry Profile Excerpts
Industry Overview
The 2,600 sawmills and wood preservation companies in the US produce and treat a variety of wood products, including structural elements and dimension lumber. Major revenue categories include softwood lumber, hardwood lumber, preserved wood products, and wood chips. Sawmills may provide wood preservation services as a final step of production. Some large companies are vertically-integrated and own timberland or downstream operations, including divisions involving real estate ownership and residential construction.
Sensitivity To Economy And Construction Activity
Demand for wood products is highly dependent on the health of the construction and household furniture industries, both of which are sensitive to economic conditions.
Variable Timber Costs And Supply
The cost and supply of timber can be volatile, and affect margins and profitability for sawmills and wood preservation services providers.
Industry size & Structure
The average sawmill and wood preservation firm operates out of a single location, employs about 35-36 workers, and generates $18 million annually.
- The sawmill and wood preservation industry consists of about 2,600 firms that employ 91,600 workers and generate $47.8 billion annually.
- Sawmills account for 90% of firms and 78% of industry revenue.
- The sawmill industry is fragmented; the top 50 companies account for 53% of industry revenue. The wood preservation industry is concentrated; the top 50 companies account for 85% of industry revenue.
- Large companies with sawmill operations include Weyerhauser Company and PotlatchDeltic Corporation. Large companies that provide wood preservation services include Koppers Holdings, and Pacific Wood.
- Some large companies are vertically-integrated and own timberland or downstream operations, including divisions involving real estate ownership and residential construction.
Industry Forecast
Sawmills and Wood Preservation Industry Growth
Recent Developments
May 24, 2024 - Weaker, Flatter Industry Growth
- The sawmill and wood preservation industry is expected to see weaker sales growth this year, and growth over the next several years will be flat. The industry’s year-over-year sales increased by 5.5% in 2022 before dropping to 3.5% in 2023, according to Inforum and the Interindustry Economic Research Fund, Inc. Sales growth is projected to moderate further to about 2.8% in 2024, then rise to 3.5% in 2025. The industry will then see steady but mostly flat average annual growth of about 3.8% through 2028, according to Inforum and the Interindustry Economic Research Fund, Inc.
- Amid a shortage of existing homes on the market, 61% of home buyers prefer new homes, according to a recent Survey by the National Association of Home Builders (NAHB). The survey’s results show the highest share of new-home preference since 2007, when 63% of home buyers preferred new construction. Homeowners who locked in a low interest rate before 2022, when the Federal Reserve began raising interest rates, are reluctant to sell and swap their low-interest loan for a higher rate. New single-family homes have filled the void in the market left by a lack of existing homes for sale. Residential construction is a key demand driver for sawmills.
- A recent downturn in Home Depot’s sales could signal that a decade-long surge in home improvement spending is softening, according to The Wall Street Journal. In May, Home Depot reported first-quarter revenue of $37.26 billion, down 4.2% from the same period a year earlier. The home improvement giant also revised its full-year guidance downward to a sales decline between 2% and 5% from a February estimate of flat 2024 growth. Some industry observers suggest homeowners may have completed many of their home projects during the pandemic. Consumers may also be pulling back on their spending amid growing economic uncertainty and high interest rates and inflation. Remodeling activity is a leading demand driver for lumber sales.
- Multifamily developers’ confidence declined in the first quarter of 2024, according to the National Association of Home Builders’ (NAHB) latest Multifamily Market Survey. The Multifamily Production Index (MPI) fell three points in Q1 2024 to 47 compared to the first quarter of 2023. The Multifamily Occupancy Index increased by one point to 83 over the same period. An MPI or MOI reading of 50 or more indicates that multifamily production or occupancy, respectively, is growing. Multifamily developers’ headwinds include a tight lending environment, higher borrowing costs, and difficulties with getting projects approved. A large number of multifamily projects currently underway is expected to dampen starts. The NAHB expects multifamily starts in 2024 to drop by 28% as development activity declines.
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